— Kishore V, SME and ACW at Edumarz.
Accounting Period Concept:
The accounting period is the period at the conclusion of which an enterprise’s financial statements are created to determine whether it has made profits or losses during that period, as well as the exact position of its assets and liabilities at that time.
At the end of the time frame, Different users demand this information regularly. intervals for many purposes, because no corporation can afford to wait long to learn its financial results, and numerous decisions must be made at regular intervals based on such information.
As a result, financial statements are prepared at regular periods.
Normally after a year, to ensure that consumers have access to up-to-date information.
For example, at the time of a partner’s retirement, the accounting term may deviate from the standard twelve-month period.
Cost Concept:
An asset’s historical cost, or purchase cost, is used to record it in the books. All accounting will be based on the acquisition cost.
This isn’t to say that the asset will always be displayed at cost.
It is recorded at cost at the time of acquisition, but its book value is gradually lowered by depreciation.
The following are some of the drawbacks of the cost concept:
When the price of commodities rises in an inflationary environment, evaluating the asset at its previous cost may not reflect the underlying position of the organisation.
If assets are documented on a historical basis, the outcomes of business units established at various times are not comparable. Human resources.
For example, are assets with no acquisition expenses that are not recognised